By Reshma Kapadia

Emerging markets’ rebound from this summer is beginning to stall ahead of the U.S. presidential election and the uncertainties wrapped up in the results, including the prospects for the fiscal cliff.

What does the election mean for these markets?

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President Barack Obama greets supporters on the tarmac upon his arrival at Denver International Airport in Denver, Thursday, Nov. 1, 2012. (AP Photo/Pablo Martinez Monsivais)

HSBC Emerging Markets Research Head Pablo Goldberg’s take:

“The chances of an end to the low-for-longer for US rates are higher in the case of a victory by Republican candidate Mitt Romney, but a complete sweep by the Republicans might reduce the chances of a gridlock in Washington, which would lessen the impact of the fiscal cliff. A polarized election might complicate a rapid resolution of the fiscal cliff, while an Obama victory would almost guarantee the continuation of low interest rates in the US.

While dollar-based emerging markets debt and local currency rates should still do well after getting confirmation after the election of the low interest rates for a long period of time policy, Goldberg writes, adding that he does think investors should be thinking about gradually switching out of bonds and into equities, which he says may stall in the coming days amid uncertainty about the fiscal cliff but should then resume.

He recommends overweighting stocks in countries showing business cycle improvements like China, Russia, Thailand, Turkey and Brazil. That said, dollar-denominated debt may be the least sensitive of the asset class in terms of fiscal cliff scenarios, he says.

Barclays strategists are perhaps a bit more cautious, noting that the recovery in emerging markets since the summer has been resilient so far to negative surprises about economic growth in this part of the market and China. But there are new hurdles on the horizon —with the election the first one.

Barclays says an investor survey suggests a Mitt Romney win would mean a “more promising outlook for growth, despite concerns that the US monetary policy stance could tighten.”An Obama re-election would be good for Treasuries.

In other words, risk-on with a Romney win and risk-off with an Obama win.

On the currency front, Barclays strategists think the Brazilian real, Indonesian rupiah and Russian ruble are the most attractive carry trade currencies given recent returns and risks, including the U.S. elections.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.